Praxair Inc. (PX) recently announced the commencement of operations at a new air separation unit in Mobile, Alabama. The unit with daily capacity of 400 tons will supply industrial gases to ThyssenKrupp’s state-of-the-art carbon and stainless steel processing facilities.
Additionally, the unit will also satisfy the demand for liquefied natural gases for the company’s merchant customer base. ThyssenKrupp is an integrated materials and technology group operating in more than 80 countries.
Praxair, one of the leading companies engaged in the production and distribution of industrial gases, has significant growth opportunities in diverse markets. Its concerted effort in increasing exposure and tapping opportunities in the emerging markets is also very encouraging. Further, the new unit in Alabama will help the company serve its customer better in the region.
Moreover, the growth prospects of industrial gas producers are very bright with demand for gases rising due to their wide application areas, including chemical processing and petroleum refining, metal production and fabricating, and electronics and health care industries.
Praxair anticipates that EPS would be roughly $5.35–$5.45 and revenue to be approximately $11 billion for fiscal year 2011. For the second quarter, the company anticipates earnings to be roughly within $1.33–$1.38 range.
However, excessive dependence on international revenue and energy costs, both volatile in nature, is risky. The company also operates in a highly-competitive environment, which may adversely affect its top-line results. Praxairfaces stiff competition from its peers Air Products and Chemicals Inc. (APD) and Airgas Inc. (ARG).
We currently maintain a Neutral recommendation on the stock.
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